Rebecca Wood, a 45-year-old single mother, was already struggling with high medical bills in 2020 when she discovered she was being charged a $2.49 “program fee” every time she added money to her daughter’s school lunch account.
With the increasing trend towards cashless payment systems in schools, more districts are partnering with processing companies that impose fees ranging from $3.25 to 4% – 5% per transaction, as per a recent report from the Consumer Financial Protection Bureau. Despite the legal requirement for schools to offer a fee-free option for payment by cash or check, there is often a lack of transparency regarding this.
“If I had a lot of money to deposit into her account at the beginning of the year, it wouldn’t have been a problem,” Wood explained. “But I was paying as we went, resulting in a fee with every payment. The $2.50 transaction fee equated to the cost of a lunch, so I was essentially paying for six lunches but only receiving five.”
The U.S. Department of Agriculture, responsible for the federal policy on fee-free school lunch, has mandated that districts inform families of their payment options since 2017. However, even when parents are aware, having to pay by cash or check to avoid fees can be burdensome.
“It’s extremely inconvenient,” expressed Joanna Roa, a 43-year-old library specialist at Clemson University in South Carolina with two school-aged children.
When her son was in first grade and she noticed the $3.25 fee per lunch account transaction, Roa and her husband decided to have him bring packed lunches to school instead.
Roa shared, “I expected a small fee here and there, but $3.25 per transaction, particularly in rural South Carolina where the cost of living and salaries are lower, is significant.”
Roas mentioned that preparing lunch daily for two children, alongside their jobs, added to their time and effort. For the last two years, her school district has been offering free lunches, changing the dynamics, but Roas acknowledged that this could change at any moment.
The data from the CFPB report revealed that 87% of the 300 largest public school districts in the U.S. partner with payment processors. These companies typically charge an average of $2.37 or 4.4% per transaction when adding funds to a child’s account.
For families with lower incomes who cannot afford to load large sums at once, these fees can accumulate weekly or even more frequently, disproportionately increasing costs. According to the report, families qualifying for free or reduced lunch can pay up to 60 cents per dollar in fees when paying electronically for school lunches.
Following her research on the fees, Wood discovered the USDA requirement for fee-free payment by cash or check. When she raised this issue to the superintendent of her daughter’s Massachusetts school district, the administrator acknowledged the oversight in transparency. Wood had planned to protest by paying for her daughter’s lunches in coins at the school office with other parents, but the pandemic altered many including school lunch policies.
Wood has since been part of a campaign that successfully advocated for universal free school lunches in her state, but she continues to challenge school processing fees for families.
“Even if lunch is provided free of charge, additional purchases or transactions incur fees,” Wood highlighted. “This disproportionately affects those who are most in need.”
Payment companies argue that school districts can negotiate fees and rates when forming contracts, but the CFPB report suggests that complex company structures could limit competition and discourage districts from negotiating. The market is mainly dominated by three companies – MySchoolBucks, SchoolCafe, and LINQ Connect.
Without the option to choose their service provider, families have fewer avenues to avoid detrimental practices that may violate consumer protection laws, the agency pointed out.
If you are a parent facing these fees, remember that you have the right to pay by cash or check under federal policy. You can also request your school district to negotiate lower fees with their payment processor or ask the district to cover the fees directly, which can aid in contract negotiations.
If your school is situated in a low-income area, check if the district qualifies for the Community Eligibility Provision, enabling it to provide free breakfast and lunch to all enrolled students. More information on CEP is accessible on the U.S. Department of Agriculture’s website.
